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So you Joined a Virtual Biotech Company?

By Olivier Laurent, VP, Development, Dauntless Pharmaceuticals

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Olivier Laurent, VP, Development, Dauntless Pharmaceuticals

Few fields can be as exciting or noble as biomedical research, working on the fringe of science in order to better the life of patients and improve human health. Unfortunately, few corporations also are as challenging to run as biotech or pharmaceutical companies. Those ventures apply themselves to scientific challenges that haven’t been solved yet by anyone, function in a heavily regulated environment designed to protect patients and limit healthcare costs and still have to be sufficiently profitable to attract venture funding or public investors.

As a result, biotech companies have been particularly creative with business models designed to reduce spending per development milestones and generally reduce the risks and costs associated with research and development. An increasingly popular model consists of a virtual biotech company that operates without any in-house laboratory and relies on outsourcing partners to create and advance a pipeline of therapeutic products. Although this model offers multiple advantages, such as reduced fixed costs and teams of highly specialized consultants independently optimized for each project, it also comes with specific challenges in the context of biotechnologies.

You must prevent knowledge externalization and disappearance

All organizations are at risk of losing institutional knowledge when relying on contractors and third party providers but the problem is particularly acute in cutting-edge scientific fields.

Virtual biotech companies need to have enough internal expertise to only outsource activities they fully understand. It is a significant risk for an organization to approach a vendor to perform a study simply to check a box in a poorly understood list of regulatory requirements. It is an even larger risk for sponsors to lean on vendors to make critical decisions they don’t understand themselves (for example, deciding whether a batch of medicine is fit for human use).

When in-house talent can’t be secured, companies can usually rely on consultants to provide the knowledge and experience required to manage vendors but should make sure to put knowledge retention policies in place. For example, all decisions by consultants need to be captured and justified, ideally to help further educate full time employees. The last thing you ever want to hear from any consultant is “Don’t worry about it”. As often as possible, use consultants to validate your staff’s decisions instead of using them to entirely replace your internal decision making process. Last but not least, make your consultants part of an inclusive team and keep them continuously engaged, for example by attending a weekly staff meeting, as opposed to only calling them to provide an out-of-context opinion from time to time. In-house knowledge and fully involved consultants make biotech companies truly resilient when facing unexpected scientific challenges, due diligence from possible partners or even regulatory audits, for which they bear full responsibility.

You can’t outsource your moral and legal responsibilities

Biotechnology companies have the duty to ensure that their biomedical research activities are conducted in a safe and ethical way and this duty can’t be legally delegated.

Should you ever use an adulterated batch of clinical supplies, you will not be able to justify your decision to the FDA by simply claiming that this batch had been released by your manufacturing vendor and that you trusted them. As a sponsor, you remain as responsible for the quality of the batch as if you had produced it in-house.

As a result, you need to remain in full control of your vendors, in particular the ones providing activities clearly regulated under applicable guidelines (such as the Code of Federal Regulations). It is critical to perform regular quality audits using auditors with a proven track record and full time employees. Having a person in plant at your vendor during critical activities is extremely beneficial to relationships, helps capture institutional knowledge and provides invaluable eye-witness answers to many questions that can arise after the facts. At any given time, it is critical for the sponsor to remain in control and participate in vendor’s activities, which may be difficult when working with complex networks of international providers.

Fragmented international workflows can easily become counter productive

It is common for bench scientists leaving large organizations with dedicated outsourcing groups to candidly underestimate the amount of energy that goes into managing contractors. As a result, small companies are prone to underestimating the value of streamlined domestic supplies chains. Although multi-centric international clinical trials may at times be the only viable option for speedy enrollment, there are significant challenges to working internationally with a large number of providers. Shipping delays, regulatory holds at borders, lack of “Good Manufacturing Practices” license and the increased time burden of coordinating multiple vendors can easily negate the effect of any R&D tax credit or of the 20-40 percent discounted price one could expect by producing drugs in low cost countries. Selecting a full service provider or a set of providers located in the same regulatory region as a clinical trial is often the smartest financial and timeline choice for small companies.

Although outsourcing tasks that are both scientifically challenging and tightly regulated may not be for the faint of heart, virtual biotech companies can substantially reduce the cost of drug development. In addition to common good outsourcing practices, biotech companies need to place an emphasis on never abdicating their regulatory responsibilities to their contractors and making sure to create and retain in-house scientific knowledge at every step of drug development.